Mortgage crisis: Jeremy Hunt rules out government support as lenders pull more deals

Jeremy Hunt has ruled out providing financial support to mortgage holders amidst the ongoing crisis, saying it would fuel inflation.

Mortgage rates on two-year fixed rate deals have hit 6% for the first time since December 2022, according to financial comparison site Moneyfactscompare, with lenders withdrawing products at short notice due to the rapidly changing situation.

Short-term deals, which many households coming off fixes will be looking to take advantage of given current repayment rates sit at a near-record high, have been climbing since May when worse-than-expected inflation data spooked the mortgage markets. However the Chancellor ruled out financial support from the government.

At Treasury Questions, he said: "Those kind of schemes which involve injecting large amounts of cash into the economy right now would be inflationary. So, much as we sympathise with the difficulties and will do everything we can to help people seeing their mortgage costs go up, we won’t do anything that would mean we’ve prolonged inflation.”

The government instead urged homeowners to look at term extensions and interest-only payment holidays. Interest rates are now heading towards highs last seen in the aftermath of Liz Truss’s Mini Budget last September. Her plans for a swathe of unfunded tax cuts led markets to price in huge interest rate hikes over fears inflation would soar. These gradually reduced until the spring after it appeared the Consumer Prices Index (CPI) rate of inflation had peaked.

However, the latest CPI figures from the ONS showed that not only did inflation fail to fall by as much as the Bank of England had forecast - something that called into question both the central bank’s inflation-reduction strategy and the government’s plans to halve inflation in 2023 - but core inflation actually jumped to its highest level in more than three decades.

Labour’s Rachel Reeves urged Hunt to apologise for the “Tory mortgage penalty” as she pressed the Chancellor on rising mortgage rates during Commons Treasury questions. The Shadow Chancellor said: “While the government squabble over parties and peerages, mortgage products are being withdrawn and replaced by mortgages with much higher interest rates.

“This is a consequence of the Conservative mini-budget last year and 13 years of economic failure, with inflation higher here than in similar countries. Average mortgage payments will be going up by a crippling £2,900 this year, so where does the Chancellor think that families are going to get the money to pay the Tory mortgage penalty?”

Hunt defended the government’s economic support package as he attacked Labour’s green prosperity plan. He replied: “Let me tell her that we announced at the autumn statement £94 billion of support to help families going through very difficult times – that was more support than was ever proposed by Labour.

“But I’ll tell her what the answer to those pressures is not, it’s not borrowing an extra £28 billion a year when people like Paul Johnson (director of the Institute for Fiscal Studies) are saying more borrowing means higher inflation, higher interest rates and higher mortgage rates.”

Reeves warned Hunt “don’t try and pass the buck” as she listed rates rising in imminent by-election seats. She said: “Let me bring this home. In Selby and Ainsty, 12,000 households will be paying an average of £2,700 more on their mortgages. In Uxbridge and South Ruislip 10,000 will be paying on average £5,200 more.

“Each and every family knows who is responsible for trashing the economy, it is the Conservative Party. So will the Chancellor apologise for the harm that his Government have caused with the Tory mortgage penalty?”

Hunt replied: “I am proud of our economic record which has seen our economy grow faster than France or Japan since 2010, the same rate as Germany, and let me say that those mortgage holders in Selby or Uxbridge or Mid Bedfordshire will be paying even more for their mortgages if the Government under a Labour Party borrowed £100 billion more in the next Parliament and we won’t let that happen.”